BHP peaking on a Chinese whisper

For the second day running the mining sector was alive with speculation.

After talk this week that BHP Billiton was considering an increase in its proposed offer for Rio Tinto came speculation that BHP itself could be the subject of Chinese stakebuilding. BHP shares closed 98p higher at a record £21.18 on reports that state-owned Chinese aluminium company Chinalco wanted to buy up to 10% of the company, with a price of about A$60 (£28.84) a share being mentioned. Chinalco, in tandem with US group Alcoa, shook the sector this year by snapping up 9% of Rio Tinto in a dawn raid.

On Tuesday traders were hearing that BHP may increase its offer from 3.4 to 3.8 of its shares for every Rio one owned, and yesterday BHP chief executive Marius Kloppers hinted to CNBC that he had not ruled out adding a cash element to sweeten the deal further. Rio ended 236p ahead at £68.81.

"We have rarely seen so much rumour and speculation on a takeover but we have never seen an offer of this scale in the mining industry," said analyst John Meyer at Fairfax. "The result is to push Rio Tinto shares higher for now but investors should remember that this could be short lived. BHP's stock could fall on a raised bid and this in turn might drag Rio Tinto's shares lower."

Amid all the gossip in the sector there were some actual events, notably an upbeat trading statement from Eurasian Natural Resources Corporation. The company, which this week dropped its proposed bid for Kazakhmys, said high commodity prices had boosted its first-quarter revenues, and its shares jumped 99p to £14.76. It was also helped by news that Kazakhstan's government had been holding talks with the country's mining groups about its controversial proposal for a metals export duty, prompting hopes of an agreement.

Deutsche Bank restarted coverage of ENRC after the collapse of the Kazakhmys deal with a buy rating and £15.50p target. Credit Suisse raised its forecast from £10 a share to £16, saying: "Management's decision to essentially walk from Kazakhmys has reduced the risk of them overpaying for assets."

Without the miners the FTSE 100 would have ended the day in the red. As it was, with the sector adding 26 points, the leading index closed 4.1 points higher at 6216.0. A bright opening on Wall Street after better than expected US inflation figures also helped.

But there were a number of factors dragging on the market. For one, the Bank of England's inflation report seemed to suggest there may be no more interest rate cuts for two years.

On top of that came a host of cash calls. FirstGroup fell 37.5p to 561.5p as it placed 43.8m shares to raise £236m for US expansion. Johnston Press asked shareholders for £212m and its shares lost 20.5p to 115.25p.

Bradford & Bingley dropped 14.75p to 144p after it announced a £300m rights issue, at 82p a share, a month after saying it would not need one. The news had analysts speculating on which bank could follow suit. James Hutson at Keefe, Bruyette & Woods said: "On read-across, we can no longer discount Alliance & Leicester, Barclays or even Lloyds joining the party." Barclays lost 10.5p to 427.25p before its update today.

Barratt Developments dropped 8.75p to 248.5p after a downbeat trading statement, although it announced a refinancing of an £800m loan that allowed it to avoid a widely anticipated rights issue. The gathering gloom over the housing market saw Persimmon fall 30p to 550.5p and Taylor Wimpey end 6.25p lower at 127.75p.

IT group LogicaCMG, whose shares have risen sharply this week on takeover hopes, added another 5p to 130.5p after it said first-quarter revenues had risen by 3.6% and issued an upbeat outlook statement.

Chinese group ReneSola, a manufacturer of solar wafers, jumped 90p to 610.5p. The company announced a six-year agreement to supply its products to Taiwan's Gintech Energy Corporation and raised its revenue forecasts for the year from $550m to $590m (£303m) after forecast-beating first-quarter results. Analysts at HansonWesthouse said: "The shares are still trading at a significant discount to the wider solar sector - a disparity we believe is undeserved given the rapidly improving visibility. As such, we believe that a short-term price target of 800p is easily justifiable."

On Aim, Allergy Therapeutics added 6p to 34.75p after it announced positive trial results for its hay fever vaccine. Elizabeth Klein at Landsbanki said: "We suggest that this data will increase confidence in the company's products and therefore retain our buy recommendation and 66p fair value [target]."

Finally sofa retailer ScS Upholstery slumped 10% to 47p as it warned profits would be below forecasts in the wake of a 14% dive in like-for-like sales in the past eight weeks. Rival Land of Leather lost 12% to 37.5p.

Geared up

Keep an eye on Torotrak, which designs and makes gearbox systems. It is a favourite with private investors, who have had a bumpy ride recently, with the company's shares falling from 34p last October to 19p in March, before recovering to their current level of 25.5p. The company is due to report annual results next Tuesday, and shareholders will be particularly keen to hear more details of its licence agreement with Indian group Tata Motors. Yesterday internet bulletin boards were full of speculation that the deal with Tata could involve the payment of a £1.7m licence fee and royalty payments of between 2.5% and 3.5%, depending on which vehicles Torotrak technology was used in.